Bloomberg News

ONGC Said Unlikely to Bid for Cove as PTT Tops Shell’s Offer

February 28, 2012

Oil & Natural Gas Corp. (ONGC), India’s biggest energy explorer, and GAIL India Ltd. (GAIL) are unlikely to counter a 1.1 billion pound ($1.7 billion) offer by PTT Exploration & Production Pcl (PTTEP) for Cove Energy Plc (COV), three people familiar with the matter said.

The state-owned Indian companies have valued Cove at about $1.3 billion and topping PTT’s bid would be too expensive, one of the people said, asking not to be identified because the deliberations are confidential. The Times of India today reported that ONGC and GAIL may team up to offer $2 billion for Cove, leading the two companies to issue a statement confirming they’re participating in the sale process.

PTT Exploration, Thailand’s only listed oil and gas company, last week trumped a 992.4 million pound bid by Royal Dutch Shell Plc (RDSA) for the African explorer and said it expects high competition from international rivals. Cove owns a stake in a deposit in Mozambique that may hold enough gas to justify exports to China and India, the world’s fastest-growing major economies.

“Valuations for Cove already look pretty high,” said Rina Sanghavi, a Kolkata-based research analyst at SPA Securities Ltd., which advises investors buy ONGC shares. “They have to take some risk at some point if they want access to reserves. Oil deals aren’t cheap any longer.”

ONGC and GAIL, India’s biggest distributor of natural gas, were considering jointly bidding for London-based Cove Energy, two people with knowledge of the matter said Feb. 21.

No Decision

ONGC and GAIL are participating in the Cove sale process, the two companies said today in a regulatory statement.

“No decision has been by the consortium whether to make an offer for Cove or the price at which any such offer may be made,” according to the statement. “There can be no certainty that the consortium will make an offer for Cove.”

ONGC rose 0.8 percent, the most since Feb. 21, to 283.40 rupees at the close in Mumbai. The stock has risen 10 percent this year compared with a 15 percent increase in the benchmark Sensitive Index. GAIL rose 0.7 percent. Cove Energy, which surged as much as 4.3 percent, gained 2 percent at 10:31 a.m. in London.

Cove holds 8.5 percent in a block off Mozambique where operator Anadarko Petroleum Corp. (APC) has found as much as 30 trillion cubic feet of gas. Standard Chartered Plc is advising Cove, which put itself up for sale last month. The transaction depends on approval from the Mozambique government.

To contact the reporter on this story: Rakteem Katakey in New Delhi at rkatakey@bloomberg.net

To contact the editor responsible for this story: Amit Prakash at aprakash1@bloomberg.net


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